92 STATE BOARD OF AGRICULTURE. 



overcapitalization. These two railroads are owned by the same men. 

 They are friends and you cannot compel them by any sort of legislation 

 to fight. 



What is the remedy? There is a remedy, perfectly just, perfectly 

 equitable, approved by every court that ever held it under consideration. 

 The railroad is a public servant. It discharges a public duty and the 

 public ma3' determine what compensation it shall receive for that duty. 

 Sometime or other we shall 'apply that remedy. I think in the first 

 instance Mr. Hill should be allowed to make his own remedy, but when 

 that has been done there should be some tribunal somewhere which shall 

 determine whether his rate is just and reasonable, some power to compel 

 him to charge a rate which is just and reasonable. ]Now then when that 

 remed}" is applied, how stands the matter ? When we get around to apply 

 that remedy how are we then? 



I said during the examination incidentally, that the great evil growing 

 out of these combinations lay in overcapitalization. The Railway Age 

 of Chicago referring to that remark said there was no connection between 

 overcapitalization and railway rates and it was singular that a member of 

 the Interstate Commerce Commission, who ought to know better, did 

 not know better than to suppose that there was any such connection. The 

 Railway Age is a very great power in railway matters, and I have been 

 in doubt whether the gentleman who wrote that editorial is a very close 

 student of railway matters. 



Ten years ago the state of Texas, believing its railway rates were 

 unreasonable, created a commission and instructed that commission to 

 formulate a schedule of rales which the railroads of Texas were ordered 

 to observe. They did so and the Supreme Court of the United States 

 enjoined the state of Texas from enforciug those rates because they did 

 not permit a return upon the capitalization of the Texas roads. A little 

 bit later the state of Nebraska, smarting under what it thinks unfair 

 freight rates made a schedule of freight rates which the roads should not 

 exceed. The Supreme Court of the Unted States held that that law could 

 not be enforced because the rates did not suffer those railroad companies 

 to earn a fair return upon their capitalization. The experience of the 

 state of South Dakota was exactly the same. 



Take this hay case that is before us now for consideration. The point 

 urged with the greatest effect, the point which we must consider, the 

 point which may prevent us from reducing that rate, or would prevent us 

 if we had the power, is the fact that those railroads are not earning a 

 fair return upon their capitalization. In finding a reasonable rate, 

 whether that question is decided by the railroad or whether it is decided 

 by the government in revising the rate, the only thing to be considered 

 is the capitalization of the railroad. If in time to come. I am asked to 

 fix a rate on the Great Northern Railroad, must I not take into account 

 the fact that those .?200,000,000 of bonds have got to be paid, and the 

 interest got to be paid? If you buy a share of Northern Security Stock 

 for |100, must I not take into account the fact that you have paid |100 

 for it? I say to you that one of the great faults in our present financial 

 condition is overcapitalization, not only of steam railroads, but of every 

 quasi-public service. Your electric light plants, etc., whatever performs 

 a service which the government may promote and for the performance of 



